Manila: Forty-nine Philippine police commandos were killed when they clashed with Muslim rebels in the south, police said Monday, a bloodbath which tested a peace accord signed last March.

An 11-hour gunbattle broke out after police entered the remote town of Mamasapano, held by the Moro Islamic Liberation Front (MILF), around 3:00 am Sunday (1900 GMT Saturday) without coordinating with the rebels as required under their ceasefire agreement.

The bodies of 49 police have been recovered from the town on Mindanao island and moved to an army camp, regional police spokeswoman Judith Ambong told AFP.

She did not say whether any MILF members were killed.

Police had been targeting two high-profile terror suspects in the operation.

"This is going to be a big problem," the MILF`s chief peace negotiator Mohagher Iqbal told AFP when asked how the fighting would affect the peace process.

But he and government officials said the ceasefire still held.

Philippine national police chief Leonardo Espina and interior and local government secretary Manuel Roxas flew to Maguindanao on Mindanao island on Monday.

In a statement Espina said the police commandos were chasing a "high-value target" believed to be behind recent bomb attacks in the south. He did not elaborate.

Iqbal said they were trying to arrest a member of regional terror group Jemaah Islamiyah called Zulkifli bin Hir alias Marwan, among the United States` most wanted with a $5 million bounty for his capture.

Malaysian bomb-maker Zulkifli is the most prominent of the 10 to 12 foreign JI members believed hiding in the Philippines. He went into hiding in the southern region in 2003 and has since been training local militants, according to the military.

Authorities were also allegedly targeting Basit Usman, commander of the BIFF Philippine Muslim rebel faction that is not part of peace talks.

Ceasefire monitors are investigating the incident, Iqbal said.The 10,000-member MILF had agreed to end decades of rebellion in the mainly Catholic nation in exchange for a proposed law now being debated in parliament that would give minority Muslims self-rule in several southern provinces.

The rebels were scheduled to start disarming at the start of this year under the peace treaty.

"This is the first encounter between the MILF and (government forces) this year. Hopefully, this will be the last," Iqbal said.

"We are committed (to the peace process). For the MILF, the ceasefire still holds," he said.

The rebel group`s vice chairman, Ghazali Jaafar, said the peace treaty signed last March was the only solution to the conflict.

"It is not logical for anybody to delay the process," he told reporters by phone.

Sunday`s bloodbath highlighted "security challenges" but nonetheless strengthened the resolve of negotiators, government peace panel chairperson Miriam Coronel-Ferrer said in a statement.

Over 1,000 people displaced by the violence have begun returning to their homes after the fighting stopped Sunday afternoon, mayor Tahirodin Benzar Ampatuan said.

The firefight in Mamasapano was only the second since the ceasefire. Two soldiers and 18 Muslim gunmen were killed in a clash on the southern island of Basilan in April 2014.

The Muslim rebellion in Mindanao had claimed tens of thousands of lives over several decades.

Since the peace deal was struck, troops and police have been pursuing the BIFF, a group of several hundred Muslim gunmen who reject the peace treaty.

Last year the BIFF pledged allegiance to Islamic State fighters in Iraq and Syria.